How To Position For 2020

21 December 2019

Dear Fellow Investors,

Today, I listened to a presentation by Tim Price, CEO of Price Value Partners in London.

He outlined how to position for 2020.

He recommended to avoid bonds and overvalued shares in overvalued equity markets including Europe and the US.

Selected shares in Hong Kong, Malaysia  and Singapore offer better value.

Position in Vietnam ,small cap Japan and the UK which offer value and in the case of Vietnam value + growth.   Wage rates are 1/3 rd that of China and they have a skilled and educated workforce. Supply chains are moving there. Vietnam is still a frontier market which means institutional investors can not invest but should Vietnam be upgraded by MISC to a developing market  institutional  funds will flow into Vietnamese shares.

Many fine quality small cap Japanese shares are trading at prices less than their cash holdings. This is because of extreme pessimism.  Value at a discount is usually a profitable bet.

With the UK election of Boris Johnson resolved expect institutional funds to push up UK shares. This professional money has been waiting on the side lines for the election uncertainty to be resolved.  This will also benefit the UK pound giving a currency gain as well as an equity gain.

He also reviewed how all major governments have debts so large they will never be repaid except by inflation or default. Many European banks are technically insolvent and are propped up by QE. Should one of these giant banks default expect contagion, share collapse  and a flight to precious metals. 

For these reasons he recommends to position in gold and silver via Central Fund of Canada.

There was panic selling in Inari last week but price held the weekly support at RM 1.60 . Volume was the highest in over 10 years. The news was that they would lose a major customer Broadcom. It is not that simple as Broadcom has a 2 year contract to buy Inari  RF chips which are supplied to Apple . Supply chains in the RF space are complex and not easy to suddenly move.  If Apple buys the Broadcom RF unit expect Inari to go to new highs due to increased demand.

Inari also has many other customers and is now in the 5G space.

In my experience, ultra high volume on a wide price spread indicates panic selling by the uninformed. Price will either move sideways or have a V recovery after this event

Expect some window dressing next week,

Invest well and grow your wealth
Bill

Critter of the week is a cassowary. It is a dangerous Australian bird and can kill a human. The claws are so sharp they can rip out some ones intestines.